The financially troubled Asian Art Museum secured legal protection on Tuesday after the city attorney fired off a terse letter to lender JP Morgan Chase threatening legal action if the bank moved ahead on its “unreasonable path” forcing the museum into bankruptcy.
In the letter, City Attorney Dennis Herrera said that JP Morgan’s move to cut the museum’s credit line and take $20 million in collateral from the Asian Art Museum Foundation raises potential issues of “unfair business practices.”
“JP Morgan should reconsider its decision and extend the letter of credit and otherwise refrain from taking any steps that could have an adverse financial impact on the Foundation,” Herrera said.
The letter came almost two weeks after JP Morgan told the museum it planned to close its $120 million letter of credit when it is set to expire Dec. 21.
Shortly after, city officials met with JP Morgan to try and work through the crisis. While San Francisco owns the museum building and its collection, it is not on the hook for the foundation’s financial obligations.
At the same time, city officials have emphasized the cultural importance the museum is to the region, and therefore they are prepared to protect the museum and its foundation, according to the City Attorney’s Office.
Herrera clearly urged all parties involved — including MBIA Inc., which insured the money — to come to the table and resolve the issue before the looming deadline.
“If JP Morgan continues down its current unreasonable path, The City will be forced to take steps to protect the museum and the public. I trust this will not be necessary,” Herrera said.
The museum, which is preparing for its January 2011 exhibition, “Beyond Golden Clouds; Five Centuries of Japanese Screens,” averages 300,000 visits per year and has 17,000 members.
“We thank The City for taking a leadership role in helping us find a resolution,” said Tim Hallman, spokesman for the Asian Art Museum.